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Ninth Circuit Confirms Minimum Wage Compliance Is Based On Workweek

Published by on January 16, 2018

Ninth Circuit held that the proper inquiry to determine compliance with minimum wage is based on workweek, not individual hour.

The Ninth Circuit in Douglas v. Xerox Business Servs., LLC, 875 F.3d 884 (9th Cir. 2017), recently weighed in on minimum wage compliance under the Fair Labor Standards Act (“FLSA”). In Douglas, Xerox paid some of its employees different rates for different tasks. Some activities were paid at a defined hourly rate, while some rates were determined by qualitative and quantitative factors. For example, some pay rates varied according to customer satisfaction and call duration. At times, the variable pay rates fell below the hourly minimum wage. At the end of the workweek, Xerox would add up the amounts earned for all activities and divide it by the hours worked that week. If the resulting ratio fell below the minimum wage, Xerox gave their employee a “subsidy pay” to ensure each employee earned at least the minimum wage based on hours worked for the total workweek. The employees argued that FLSA compliance is determined on an hour-by-hour basis and does not permit averaging over longer periods of time. The employees claim that the FLSA measures compliance on an hour-by-hour basis and does not allow averaging over a longer period, thus, compensating employees for some hours at a rate below the minimum wage violates the FLSA.

The key provision of the FLSA, 29 U.S.C. § 206(a)(1)(C), states that “[e]very employer shall pay to each of his employees who in any workweek is engaged in commerce . . . not less than . . . $7.25 an hour.” Analyzing the text of the statute, the court acknowledged the ambiguity regarding the unit of measurement when calculating the minimum wage. Although the Department of Labor (“DOL”) has never promulgated a per workweek calculation regulation, the DOL adopted the per workweek interpretation shortly after the FLSA was passed in 1938. The Second, Fourth, Eighth, and D.C. Circuits have all adopted the per workweek interpretation as well. The court considered the importance of uniformity in statutory construction in this area, particularly because national companies that operate in multiple jurisdictions should be able to reasonably rely on administrative guidance in developing their national payroll policies. Varying interpretations impose an unreasonable burden on business, particularly if there is no clear discernable unfair advantage to the employer over the employee in such an interpretation.

Welter Insights

Employers should make sure their compensation schemes comply with both federal and state minimum wage requirements. Under the laws of some states, minimum wage must be paid on a per hour basis. Provided that no such state law applies, employers in the Ninth Circuit can comply with minimum wage laws by ensuring that each employee is earning at least the minimum wage based on hours worked for the total workweek.

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